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Estate of Agnew v. Ross

Supreme Court of Pennsylvania

January 19, 2017

ESTATE OF ROBERT H. AGNEW, MARGARET ALZAMORA, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF ROBERT H. AGNEW, WILLIAM AND SHEILA HENNESSY, H/W, MARGARET HENNESSY, JAMES AND CHRISTINE HENNESSY, H/W AND PAUL AND EILEEN JANKE, H/W
v.
DANIEL R. ROSS, ESQUIRE, MEGAN MCCREA, ESQUIRE AND ROSS & MCCREA, LLP APPEAL OF: DANIEL R. ROSS, ESQUIRE AND MEGAN MCCREA, ESQUIRE

          ARGUED: May 10, 2016

         Appeal from the Order of the Superior Court at No. 2195 EDA 2014, dated February 2, 2015, reconsideration denied April 7, 2015, reversing the grant of summary judgment of the Chester County Court of Common Pleas, Civil Division, at No. 12-09300, dated June 4, 2014 and remanding

          OPINION

          DOUGHERTY JUSTICE.

         We consider whether individuals who are not named in an executed testamentary document have standing to bring a legal malpractice action against the testator's attorney, as purported third-party beneficiaries to the contract for legal services between the testator and his attorney. For the reasons that follow, we conclude such individuals do not have standing to sue the testator's attorney for a breach of contract. We therefore reverse the Superior Court and remand for reinstatement of the trial court's order granting summary judgment and dismissing the claims.

         As the appeal arises from the grant of summary judgment, we set forth the facts as viewed in the light most favorable to the non-moving parties, in this case, plaintiffs-appellees William and Shelia Hennessy, James and Christine Hennessy, Eileen and Paul Janke, Margaret Hennessy and Margaret Alzamora. Toy v. Metro. Life Ins. Co., 928 A.2d 186, 195 (Pa. 2007). In November 2003, the testator Robert Agnew retained defendant-appellant Daniel Ross, Esquire, to draft various estate planning documents.[1]Ross drafted a Will and an amendment to Agnew's Revocable Trust, which was first established in 1994, in order to effectuate Agnew's intended bequests.[2] Over the next several years, Ross drafted various amendments to both the Revocable Trust and the Will, as directed by Agnew; these documents, including a 2007 Trust Amendment, were executed by Agnew.[3] As of 2010, Agnew's Will bequeathed specific gifts of cash and property to selected friends and family members, including appellees, who are relatives of his late wife, and the residue of his estate to the Revocable Trust. The 2007 Trust Amendment more specifically directed that upon Agnew's death the remaining principal and accumulated income of the Revocable Trust should be distributed to pay the balance of any legacies in the Will that the estate is otherwise unable to pay. 2007 Trust Amendment at 2, Exhibit E to Motion for Summary Judgment. If there were assets remaining in the Revocable Trust following satisfaction of the legacies under the Will, the remaining assets were to be distributed to Muhlenberg College, Temple University, Chestnut Hill College and Drexel University in the form of five $250, 000 scholarship funds. Id. at 2-3. If there were assets remaining following distribution of the scholarship funds, the residue was to be distributed to Muhlenberg College, Chestnut Hill College and Drexel University. Id. at 3.

         In March 2010, Agnew was admitted into a hospice program.[4] During that summer, appellee Margaret Alzamora, contacted Ross and told him Agnew wanted to make changes to his estate plan. Accordingly, on August 18, 2010, Ross met with Agnew to discuss amendments to various existing testamentary documents and to establish a new trust relating to property Agnew owned in Florida (the Florida Trust). While Alzamora participated in a portion of the meeting between Agnew and Ross, she was not present when the two actually discussed the estate plan. During the meeting, Agnew related to Ross he wanted to limit the amounts going to charity and provide more funds to appellees. Deposition of Ross, 10/3/2013 at 41, Exhibit J to Motion for Summary Judgment. Agnew told Ross that Alzamora would subsequently provide him with further details. Id. at 45.

         On August 21, 2010, Alzamora contacted Ross by email and advised him the residue of Agnew's Revocable Trust was no longer to be distributed to the three colleges indicated in the 2007 Trust Amendment, but now was to be divided into five equal shares between appellees. Email dated 8/10/2010, Exhibit K to Motion for Summary Judgment. Alzamora also informed Ross that Agnew wished to make bequests to appellees' children. Id. Ross drafted an amendment to the Revocable Trust (the 2010 Trust Amendment), which continued to provide for gifts in the amount of $250, 000 to four colleges, but expressly provided that the residue of the assets of the Revocable Trust was to be distributed to appellees. 2010 Trust Amendment at 3-4, Exhibit L to Motion for Summary Judgment. Additionally, Ross drafted a revised Will, which provided various monetary gifts to appellees and their children.[5] 2010 Will at 1-3, Exhibit L to Motion for Summary Judgment.

         On August 27, 2010, Ross emailed the revised Will and the 2010 Trust Amendment to Alzamora. Agnew reviewed the documents with Alzamora and did not communicate any comments or request any changes to the documents. Agnew did not, however, sign the revised Will or the 2010 Trust Amendment at that time. On September 2, 2010, Ross met with Agnew and Agnew did sign the Florida Trust and the 2010 Will, which directed the residue of his estate should be distributed in accord with the Revocable Trust.[6] Agnew did not, however, sign the 2010 Trust Amendment. Ross did not have a copy of that document with him at that time. Ross retained all of the executed documents and stored them in his firm's will vault.

         Agnew died in January 2011. Letters Testamentary were granted to Alzamora and the revised Will executed in September 2010 was admitted to probate as Agnew's last will and testament. On February 10, 2011, Ross informed Alzamora it was his belief the 2010 Trust Amendment had never been executed. Alzamora informed Ross she did not have a signed version of the 2010 Trust Amendment. Alzamora Affidavit dated 2/11/2014, Exhibit K to Memorandum of Law in Opposition to Motion for Summary Judgment.

         Appellees and the Estate of Robert Agnew filed suit against Ross, his partner Megan McCrea, Esq., and Ross & McCrea LLP (collectively referred to as appellants), alleging appellants breached the contract to provide legal services to their client Agnew, when Ross failed to have Agnew execute the 2010 Trust Amendment. Specifically, appellees claimed to be third-party intended beneficiaries of the contract for legal services between Agnew and Ross, and as a result of Ross's breach, appellees were denied sums of money to which they were entitled under the 2010 Trust Amendment. Appellees also asserted a legal malpractice claim sounding in negligence against Ross and McCrea individually, and against Ross & McCrea LLP on a theory of respondeat superior.

         Appellants filed preliminary objections and the trial court sustained them in part, holding the Estate of Robert Agnew was an improper party to the suit, and Alzamora's claims in her capacity as executrix should be dismissed. Trial Court Order dated 5/2/2013, Exhibit C to Motion for Summary Judgment. The trial court also dismissed appellees' negligence and respondeat superior claims against Ross, McCrea and the firm, on the basis the individual appellees did not have attorney-client relationships with appellants to support those claims. Id. However, the trial court concluded appellees could potentially establish they were intended third-party beneficiaries of the legal services contract between Ross and Agnew, and allowed that breach of contract claim to proceed against Ross and McCrea individually. Id.

         The parties proceeded to discovery, during which Ross testified in a deposition with regard to the 2010 Trust Amendment: "I believe he would have signed the amendment had I prepared it, but because it was not with me, it was not discussed and until I discussed it with him I can't say for certain he would have signed it." Deposition of Ross, 10/3/2013 at 30, Exhibit J to Motion for Summary Judgment; see also id. at 77-78 ("… [Agnew] had generally indicated that intent but the specifics I had not spoken to him about. So until I spoke to him specifically about that it is only speculation what he would have signed."). Ross attributed his failure to bring the 2010 Trust Amendment to the September meeting to "oversight." Id. at 30. He further stated it was a mistake not to present the 2010 Trust Amendment to Agnew. Id. at 30, 78. During her deposition, Alzamora acknowledged Agnew was aware the 2010 Trust Amendment had been prepared and he had previously reviewed it, but confirmed that it was not among the documents executed at the September 2010 meeting. Deposition of Alzamora, 11/7/13 at 46-50, 88. Exhibit F to Motion for Summary Judgment.

         At the close of discovery, appellants moved for summary judgment, which the trial court granted. The trial court recognized that appellees argued they are third-party beneficiaries to the contract for legal services between Ross and Agnew, and framed the issue before it as "whether there is any executed document which indicates that these plaintiffs were intended as beneficiaries." Trial Court Opinion dated June 4, 2014 at 4, 7. In dismissing appellees' claim, the court held in order to maintain the breach of contract action against Ross as third-party beneficiaries to the legal services contract between Agnew and Ross, appellees would need to show that there is an "otherwise valid" document naming them as recipients of all or part of the estate. Id. at 7. "In other words, the beneficiary's right must be shown and established by the showing of some otherwise valid document that effectuates the intention of the parties [to the legal services contract]." Id. The trial court relied on Gregg v. Lindsay, 649 A.2d 935 (Pa. Super. 1994), where the Superior Court held the claimant was not entitled to sue the testator's lawyer for breach of contract when the testator never signed the drafted will naming claimant as heir.[7] In Gregg, there was evidence to show the testator approved of the new will, but there were no witnesses available to effectuate his execution of it at that time, and he later died before signing it. Id. at 936-37. In this case, the trial court noted "there is no competent evidence of that which transpired at the September [2010] meeting between Mr. Agnew and Ross." Trial Court Opinion at 9.

         The Superior Court reversed, opining there was evidence of the September 2, 2010 meeting, and implying the trial court did not examine the facts in the light most favorable to appellees in violation of the applicable standard of review on appeal from summary judgment. Estate of Agnew v. Ross, 110 A.3d 1020, 1027 (Pa. Super. 2015). The Superior Court considered Ross's deposition testimony that he believed he "made a mistake by not presenting the 2010 Trust Amendment for Mr. Agnew's signature at the September [2010] meeting, " and further admitting this was an "oversight." 110 A.3d at 1028, citing Deposition of Ross, 10/3/2013 at 25, 30. The Superior Court acknowledged Ross also stated, "I can't say for certain he would have signed it, " id., citing Deposition of Ross, 10/3/2013 at 30, but the panel focused on the fact Ross had been Agnew's lawyer for seven years prior to his drafting the 2010 Trust Amendment, and observed this ongoing relationship distinguished this case from Gregg, where the lawyer had never met the testator before drafting a will for him at, essentially, his deathbed. Estate of Agnew, 110 A.3d at 1027 n.8.[8] The Superior Court noted Gregg was not precedential, noting the opinion was authored by one judge on a three-judge panel, and garnered only CIR votes from the other two panel members. Id. at 1026 n.6.

         The Superior Court further held the trial court erred in failing to apply a certain footnote from Guy v. Liederbach, 459 A.2d 744 (Pa. 1983). In Guy, four justices (a majority of those participating) joined the holding that plaintiff Frances Guy, expressly named as an heir in an executed will, stated a cause of action for breach of contract against the lawyer who drafted the will, where the signed will was later held to be invalid because Guy herself witnessed the testator's signature, at the lawyer's direction, and in violation of then-applicable New Jersey law.[9] The Court adopted Restatement (Second) of Contracts §302 in determining Guy had standing to make such a claim as an intended third-party beneficiary of the contract for legal services between the testator and his lawyer.[10] Id. at 757. The Court utilized the Section 302 analysis to devise the following two-part test for determining whether a person is an intended third-party beneficiary of a contract between others, such that the third party may enforce the contract:

(1) the recognition of the beneficiary's right must be "appropriate to effectuate the intention of the parties, " and
(2) the performance must "satisfy an obligation of the promisee to pay money to the beneficiary" or "the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance."

Guy, 459 A.2d at 751. The Court stated the first part of the test sets forth a standing requirement, which restricts application of the second part of the test, "which defines the intended beneficiary as either a creditor beneficiary (§ 302(1)(a)) or a donee beneficiary (§ 302(1)(b))." Id. The Court applied this test to hold a third party to a legal services contract has standing to bring an action against the testator's lawyer to enforce a failed legacy where "the intent to benefit [the third party] is clear and the promisee (testator) is unable to enforce the contract." Id. at 747. The Court thereby expressly overruled the prior case law requiring privity in such cases. Id. at 751, citing Spires v. Hanover Fire Ins. Co., 70 A.2d 828 (Pa. 1950) (only where parties to contract express intention that third party is to be beneficiary of their contract may third party have standing to enforce the contract).

         According to Guy, in order for a plaintiff to have standing as a third-party beneficiary to the contract of others, her "right to performance must be 'appropriate to effectuate the intentions of the parties, '" and the "standing requirement leaves discretion with the trial court to determine whether recognition of third-party beneficiary status would be 'appropriate.'" Id. at 751. The Court further made clear the relevant underlying contract (on which the plaintiff is suing), "is that between the testator and the attorney for the drafting of a will. The will, providing for one or more named beneficiaries, clearly manifests the intent of the testator to benefit the legatee. … Since only named beneficiaries can bring suit, they meet the first step standing requirement of §302." Id. In Guy, the will naming Guy was signed by the testator, and therefore, the Court concluded allowing her to enforce the contract between Guy and his lawyer would "effectuate the intentions of the parties." Id. at 751, quoting Section 302.

         Guy includes a footnote on which the Superior Court relied to create a cause of action for appellees here. The footnote refers to "non-named beneficiaries, " and as Guy was expressly identified in the will at issue in that case, the footnote clearly is dicta:

There are, of course, beneficiaries under a will who are not named, and who may be either intended or unintended beneficiaries. The standing requirement may or may not be met by non-named but intended beneficiaries: the trial court must determine whether it would be "appropriate" and whether the circumstances indicate an intent to benefit non-named beneficiaries. It follows that unintended third party beneficiaries could not bring suit under § 302 against the drafting attorney. In making that determination the trial court should be certain the intent [of the contracting parties] is clear.

Id. at 752 n. 8. Ultimately, the Court concluded Guy was entitled to pursue her claim against the drafting attorney because she was named in an executed will which was made invalid only through the drafting attorney's clear error regarding the applicable law relating to witnesses. The will was not made invalid on the basis it was never signed by the testator. The Court specifically held "persons who are named beneficiaries under a will and who lose their intended legacy due to the failure of an attorney to properly draft the instrument should not be left without recourse or remedy[.]" Id. at 752.

         In this case, the Superior Court determined Guy, and particularly footnote 8, directed that appellees have standing to sue appellants, and remanded for further proceedings. The court opined the record "supports an inference that Ross intended to give [a]ppellants the benefit of his contract with Mr. Agnew." 110 A.3d at 1028. The court concluded the trial court should have recognized appellees held a "right to performance" of the contract between Agnew and Ross because such right was "appropriate to effectuate the intention of the parties." Id.

         Appellants filed a petition for allowance of appeal, and we granted allocatur to consider: 1) whether the Superior Court erred, and failed to apply "clear precedent, " in holding "an executed testamentary document naming a third party as a beneficiary was not a prerequisite for that third party to have standing to bring a legal malpractice action based on breach of contract" against the testator's attorney; and 2) whether the Superior Court erred when it determined evidence of the intent of the testator's attorney alone was sufficient to establish an issue of fact to defeat summary judgment on the issue of a third party's standing to pursue a legal malpractice breach of contract action against a testator's attorney. Estate of Agnew v. Ross, 122 A.3d 1030 (Pa. 2015).[11]

         Appellants first argue the Superior Court's decision to allow appellees' lawsuit against them to proceed conflicts with the narrow exception to strict privity this Court created in Guy, as well as the Superior Court's own earlier decisions in Gregg, supra, Hess v. Fox Rothschild, LLP, 925 A.2d 798 (Pa. Super. 2007) (declining to extend narrow class of third-party beneficiaries identified in Guy to legatees of residuary trust who claimed their intended legacy was diminished by attorney's drafting error), and Cardenas v. Schober, 783 A.2d 317 (Pa. Super. 2001) (would-be legatees could not recover from executor because they were not named legatees in decedent's will and handwritten documents purporting to bequeath money and property to them did not constitute otherwise valid will). Appellants note in Guy, this Court looked to the provisions of an executed will to determine the testator's intent to benefit Guy and to conclude Guy was an intended third-party beneficiary of the contract between the testator and his lawyer. Appellants assert that allowing a party to maintain an action for legal malpractice against a testator's lawyer in the absence of an executed testamentary document identifying that party as a beneficiary would undermine the integrity of properly executed wills, enhance the risk of misinterpretation of the testator's intent, undermine an attorney's undivided loyalty to his client and encourage fraudulent claims. Furthermore, appellants argue, if the Superior Court's published decision is allowed to stand, attorneys could be liable to pay bequests a testator never intended to make. Appellants observe Pennsylvania does not allow the use of extrinsic evidence to show the testamentary intent of the testator was other than reflected in the executed testamentary document because to allow the use of extrinsic evidence to prove such a claim would open the door to fraud, result in the defeat of the testator's intention, as well as nullify the provisions of the Probate Code which require testamentary documents to be in writing and signed by the testator. Appellants' Brief at 28, citing In re Beisgen's Estate, 128 A.2d 52, 55 (Pa. 1956) (testator's intent must be determined from face of the will and extrinsic evidence cannot be used as evidence of testator's intent independent of the written words employed); In re Umberger's Estate, 87 A.2d 290, 293 (Pa. 1952) ("It is not satisfactory procedure to accept parol testimony to explain unambiguous language in a will."); In re Penrose's Estate, 176 A. 738, 739 (Pa. 1935) (testimony is not admissible to alter or add to the terms of a will).

         Appellants also argue an attorney owes no obligation to potential heirs to have testamentary documents executed promptly, or at all, and cites cases from other jurisdictions to support its position. Appellants' Brief at 30-31, citing Gregg; Linth v. Gay, 360 P.3d 844, 848-49 (Wash. App. 2015) (trustor's attorney did not owe duty to trust beneficiary to properly execute trust documents because of concerns about compromising attorney's loyalty to client); Parks v. Fink, 293 P.3d 1275, 1287 (Wash. App. 2013) (attorney owes no duty to prospective will beneficiary to have will executed promptly; risk of interfering with attorney's duty of undivided loyalty to client exceeds risk of harm to prospective beneficiary); Sisson v. Jankowski, 809 A.2d 1265, 1269-70 (N.H. 2002) (attorney did not owe duty to testator's brother, as prospective beneficiary, to ensure testator executed his will promptly); Radovich v. Lock-Paddon, 41 Cal.Rptr.2d 573, 584 (Cal.Ct.App. 1995) (attorney owed no duty to potential beneficiary where testator had will in her possession for two months prior to death and did not execute it); Krawczyk v. Stingle, 543 A.2d 733, 736 (Conn. 1988) (attorney not liable to third parties for alleged negligent delay in execution of estate planning document).

         Appellants further contend the rule disallowing a malpractice action without a valid testamentary document naming the alleged heir-plaintiff is consistent with Pennsylvania law requiring proof of actual loss. Appellants' Brief at 31-32, citing, Myers v. Seigle, 751 A.2d 1182, 1185 (Pa. Super. 2000) (summary judgment in favor of lawyers appropriate where legal malpractice plaintiff could not establish actual loss or identify design or manufacturing defect due to lawyers' disposal of vehicle involved in accident). Appellants argue a showing of actual loss in this case requires proof Agnew would have executed the 2010 Trust Amendment naming appellees, absent a breach by appellants, and appellants claim appellees cannot possibly produce such proof. Appellants note there is no presumption under the law a decedent who requested changes to his estate plan would have executed those amendments. According to appellants, whether Agnew would have signed the 2010 Trust Amendment at some ...


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